5 things about the world's oldest bank that Italy sold it's stake in

Italy has reduced its stake in Banca Monte dei Paschi di Siena (MPS), the world’s oldest bank, by selling a 15 per cent share for €1.1 billion ($1.16 billion).

This transaction brings Banco BPM, Italy’s third-largest bank, on board as a shareholder with a 5 per cent stake, potentially paving the way for future consolidation in the Italian banking sector.

Here are five notable aspects of MPS:

1. A Legacy spanning over 500 years

Founded in 1472 as a mount of piety to assist the underprivileged, MPS has evolved into a significant financial institution. Its longevity reflects its adaptability and enduring presence in the banking industry.
GRUPPO MPS

2. Headquarters in historic Siena

MPS’s headquarters are located in the Palazzo Salimbeni in Siena, Italy. This historic building has been the bank’s home since its inception, a symbol of its deep-rooted connection to the city’s rich cultural and financial heritage.

3. A major player in Italian banking

As one of Italy’s leading banks, MPS has a significant market share in various business areas, including leasing, factoring, corporate finance, and investment banking. Its extensive network and services have made it a cornerstone of Italy’s financial landscape.

4. A history of challenges

Over the years, MPS has faced major challenges, largely due to its controversial 2007 acquisition of Banca Antonveneta for €9 billion. Widely criticised as overpriced, the deal strained MPS’s finances and left it vulnerable during the global financial crisis.

Allegations of fraud and financial mismanagement soon followed, with senior executives accused of hiding losses through complex derivatives trades, further eroding investor confidence, according to Financial Times.

By 2017, MPS required a €5.4 billion bailout from the Italian government as part of an €8.1 billion rescue plan. The intervention included a major restructuring, which saw the bank write down non-performing loans, raise €2 billion in capital, close branches, and cut staff.

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These measures helped stabilise the bank, returning it to profitability and positioning it for privatisation and potential partnerships. However, it remains a cautionary tale of over-ambitious expansion and governance failures.

5. Towards privatisation

The recent sale of a 15 per cent stake by the Italian government is part of a broader strategy to reduce state ownership and return MPS to private hands. However, the Italian government still holds a significant share in MPS. The path to full privatisation and the potential for mergers or acquisitions remain uncertain and will likely unfold over time.

With inputs from agencies